Public sector bodies such as councils and NHS trusts will be encouraged to buy British steel in an effort to help save the industry.
The Government said all public sector organisations procuring steel will be required to consider the social and economic impact on the UK before buying from abroad.
The move came as a possible buyer emerged for the Port Talbot steelworks in South Wales, where thousands of jobs are at stake.
Steel tycoon Sanjeev Gupta - the founder of the commodities firm Liberty House- said he had already opened discussions with owners Tata Steel and was ready to hold talks with the Government.
"We would need a proper partnership with the Government. I don't know what that would entail at this stage. We've started the discussions ... we are in the process of starting a discussion with Tata," he told The Sunday Telegraph.
"I haven't made a proposition that I want to buy all of (Tata Steel UK) because that's too big an undertaking to even put on the table at this stage.
"If the company, its people, its workers and the Government would be willing to consider my suggestions then I'm willing to engage in a discussion about what role we will play in that."
After a week in which the Government has struggled to formulate a response to the decision by Tata to sell off its loss-making UK assets, ministers said they were taking steps to create a "level playing field" for British manufacturers.
Guidelines introduced last year requiring central government bodies to take into account the "true value" of British steel will be extended across the public sector - including the NHS and local councils.
Under the guidelines, public procurements which involve the supply of steel will need to consider "responsible sourcing, the training suppliers give to their workforce, carbon footprint, protecting the health and safety of staff and the social integration of disadvantaged workers".
Contractors working for the public sector will also be required to advertise their requirements for steel so that UK firms can compete for the business.
Cabinet Office minister Matt Hancock said: "When public bodies buy steel they must taking account of the true value of buying British."
Business Secretary Sajid Javid said: "By changing the procurement rules on these major infrastructure projects, we are backing the future of UK steel - opening up significant opportunities for UK suppliers and allowing them to compete more effectively with international companies."
The announcement came amid heavy criticism of ministers for failing to take more effective action to prevent the "dumping" of cheap Chinese steel, seen as one of the key reasons for the problems in the UK steel industry.
For Labour, shadow business secretary Angela Eagle said while the announcement was welcome, ministers had to do more if they were to ensure the survival of the steel industry in the UK.
"The Government has been dragged kicking and screaming to take action to support the steel industry, which is a vital foundation industry and has descended further into crisis on their watch," she said.
Roy Rickhuss, general secretary of the Community trade union, said the announcement was "a small step in the right direction" but did not address the need for immediate action to secure the future of the plant at Port Talbot and other UK steelworks under threat of closure.
"Frankly, steelworkers will be shocked to discover that these measures were not already in place. These are bread-and-butter policies that should have been providing opportunities to UK steel producers already," he said.
Tony Burke, assistant general secretary of the Unite union, said: "This measure needs to be part of a broader package and compel British steel to be used in all infrastructure projects. Otherwise, there will be no recognisable steel industry left in the UK to benefit."